A quick look around on the
Internet this morning shows that more than 9 million people in the UK do
not pay off their credit card balances each month.
The average balance left outstanding is over £1000. The interest charged
on such a balance varies according to the card, but we have seen rates
of up to 29%!
When you bear in mind that banks are offering somewhere in the region of
3% interest on account balances, it's easy to
see how such a fantastic amount of money is turned over within the
banking and finance industry!
Consider a card with an average outstanding balance of £1000: with an
interest rate of 19%, this could take over 20 years to pay off at
minimum payment levels! On a balance of £1000 at 19% for 20 years, you'd
pay back a total of £3889.
Credit cards are a tool designed to make a profit for those who issued
them. They are not provided for your convenience! The only way it makes
sense to use a credit card is to only use it up to a point at which you
can pay the full balance each month.
In other words you are using it to access money you already possess, and
not using it as a form of loan. To use a credit card for a loan is going
to be some of the most expensive credit you will ever encounter.
I know that life isn't always easy, and some people will say they need
to use a credit card to get by. This is the worst position you could be
in, and it is really important that you do something about your
financial circumstances if you are in this position. Continuing along
that path will steadily and inexorably lead to financial disaster.
Nobody said it's easy! But I would be doing no service at all if I
avoided the facts, even if it's not what everybody wants to hear.
Another unwise use for a credit card is to get a cash advance from an
ATM machine. whereas with purchases on the credit card there is an
interest-free period up until the next payment is due, there is no such
period of grace for cash withdrawals. Use a debit card instead.
And be aware of the deal with store cards. These can typically carry
some of the highest interest rates around.
Any savings are often have wiped out by the fact that youare encouraged
to buy more then you otherwise might have,
and even if they are genuinely savings, they are typically dwarfed by
the total interest when the balance is not paid in full.
Use your credit card wisely, use it to your advantage, andget on the
right side of the credit card game.
-----------------------------
David Andiers is the owner of
www.rfcredit.com
which is a premier resource for credit information.
----------------------------- |
